Compared to return on investment (ROI) , residual income (RI) may be a better measure of the financial performance of an investment center because:
A) Problems associated with measuring the investment base are eliminated.
B) Of the fact that desirable investment opportunities will not be neglected by divisions currently earning high rates of return.
C) Only the gross book value of assets needs to be calculated.
D) Returns do not increase as assets are depreciated.
E) The arguments over the implicit cost of capital (discount rate) are largely eliminated.
Correct Answer:
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